Want to be in the loop?
subscribe to
our notification
Business News
MORE MONETARY EASING MEASURES FORECAST IN 2020
The State Bank of Việt Nam (SBV) is expected to further take monetary easing measures to support the country’s GDP growth target of above 5 per cent this year in light of a weak economic outlook, experts forecast.
“We forecast an additional 50 basis points of interest rate cuts, which would take the refinancing rate to 4.0 per cent and discount rate to 2.5 per cent by end of 2020,” Fitch Solutions experts said.
The SBV cut its benchmark interest rates by 50 basis points on May 12. Accordingly, the refinancing rate was reduced to 4.5 per cent from 5.0 per cent, discount rate to 3.0 per cent from 3.5 per cent, and the overnight inter-bank lending rate to 5.5 per cent, from 6.0 per cent with effect from May 13.
According to the experts, a weak growth outlook in 2020 will likely spur further monetary easing. Fitch forecast Việt Nam’s real GDP growth to decelerate to 2.8 per cent in 2020, from 7.0 per cent in 2019, as it continuously forecast weak external demand from a world economy in recession to hamper a recovery in Việt Nam’s large manufacturing industry, and a general aversion to international air travel due to contagion fears to continue buffeting the tourism sector.
“That said, we now see upside risks to our growth forecast as Việt Nam is in the process of gradually reopening its economy with the easing of movement restrictions, following quick and stringent COVID-19 containment measures over the first four months of the year, in addition to growing reports of companies seeking to relocate their production from China to Việt Nam.”
As Fitch still views the Government’s real GDP growth target for 2020 of above 5 overly ambitious given a benign global economic backdrop, it believes that the SBV is likely to persist with its monetary easing cycle over the coming months, in the form of benchmark interest rate cuts and macroprudential measures to support the Government’s achievement of its growth target.
In addition, Fitch said manageable inflation at below the Government’s 4.0 per cent target in 2020 will also allow for further monetary easing.
“We forecast inflation to average 3.8 per cent in 2020, down from 4.9 per cent year-on-year over the first four months of 2020. We expect subdued fuel prices due to the ongoing global supply glut to result in a transport price deflation and low core inflation due to weaker domestic demand to partially offset high food inflation brought about by the African swine fever which prompted a significant culling of the hog herd towards end-2019, pushing up meat prices.”
Despite Fitch’s expectations for further monetary easing, it maintained its view that the key problem now is a lack of loan demand and investment appetite amid elevated economic uncertainty brought about by the COVID-19 shock on the world economy. As such, further interest rate cuts at this juncture will not provide much of a boost to the economy.
Source: VNS
Related News
![Card image cap](/uploads/news/Eco2.jpg)
GOV’T UNVEILS ACTION PLAN TO ACCELERATE INDUSTRIALISATION
Vietnam aspires to become among the top three industrial powerhouses in ASEAN, with the industrial sector contributing over 40 per cent to GDP. The manufacturing and processing sector is expected to account for around 30 per cent of GDP, with a strong emphasis on high-tech products aiming for over 45 per cent of the sector's value. To further drive the economy, the service sector is projected to contribute over 50 per cent to GDP, with tourism alone generating 14-15 per cent.
![Card image cap](/uploads/news/economic.jpg)
VIETNAM’S H1 ECONOMIC GROWTH QUITE IMPRESSIVE: ADB COUNTRY DIRECTOR
Country Director of the Asian Development Bank (ADB) for Vietnam Shantanu Chakraborty has expressed his impression of the Southeast Asian nation’s economic growth of 6.4 per cent in the first half of this year. The growth was mainly driven by strong trade recovery, where export grew by 14.5 per cent and import by 17 per cent over last year, he told the Vietnam News Agency. However, he said, the domestic segment remained sluggish.
![Card image cap](/uploads/news/Infrastructure13.jpg)
REAL ESTATE FIRMS AGGRESSIVELY RESTRUCTURING BOND DEBT
From the start of 2024 to July 5, the market saw 133 private placements and ten bond public offerings, totalling over VNĐ140 trillion. 65.6 per cent of this value was from the banking sector, while real estate bonds accounted for only 24.6 per cent, or over VNĐ34.5 trillion.
![Card image cap](/uploads/Logo/Cathay%20%281%29.jpg)
ONE-TIME OFFER: COMPLEMENTARY CATHAY PACIFIC LOUNGE PASS
Begin your trip on the right note in Cathay Pacific’s first-ever ferry lounge, located at Shenzhen’s Shekou Cruise home port. Situated at the end of the pier, the ferry lounge offers a breathtaking 270-degree view of the sea. You can immerse yourself in sheer luxury and revel in the panoramic beauty. Catch a glimpse of Hong Kong in the distance.
![Card image cap](/uploads/news/Industrial%20Zone.jpg)
VIỆT NAM TARGETS FULL MOBILE BROADBAND COVERAGE ON HIGHWAYS, INDUSTRIAL ZONES BY 2025
By 2025, Việt Nam aims to achieve one hundred per cent mobile broadband coverage on all national highways, expressways and railways under a plan to enhance the quality of Việt Nam’s mobile telecommunications network by 2025, which has been approved by the Ministry of Information and Communications (MIC).
![Card image cap](/uploads/news/Investment6.jpg)
VIETNAM ONE OF FASTEST-GROWING E-COMMERCE MARKETS IN SOUTHEAST ASIA
The report released on July 16 highlighted that the total GMV of Southeast Asia’s eight leading e-commerce platforms rose to $114.6 billion in 2023, up 15 per cent from 2022. The key drivers for the region's e-commerce GMV expansion in 2023 are Vietnam and Thailand, growing 52.9 per cent and 34.1 per cent on-year, respectively.